Will Google Buy TiVo?

Here's an interesting suggestion on how Google could deal with the pending patent infringement litigation TiVo is pressing against Google's Motorola Mobility business: They could simply buy TiVo outright.

This idea comes courtesy of Janney Capital analyst Tony Wible, who has been keeping close tabs on the progress of the infringement suit. And he thinks the situation is leaning in TiVo's favor.

"The claims construction for TIVO's upcoming litigation against Motorola/GOOG is in for the five patents involved and heavily favors TIVO, which prevailed in 81% of the claims (5% went in favor of Motorola and 14% were split)," he writes. "These interpretations will make it much more difficult for Motorola to prevail in court as the prior precedent and the broader interpretations are harder to circumvent. Infringement on any one item creates a problem for Motorola."

Wible thinks the court's approach to claims construction in the case opens the door to a settlement agreement; he adds that Google is not likely to be able to sell the Motorola Mobility Home business until the situation is settled. He estimates that Google would face up to $720 million in damages if TiVo were awarded 50 cents a month on 20 million installed cable boxes over a six year period. "This would be worth about 50% of TIVO’s market cap and would be their largest settlement to date.," he notes, adding that "this probability does not appear to be priced into TIVO's stock."

And here's the best part. One option to settle would be for Google to flat out buy TiVo.

"It may be one of the only cost effective ways to part with the Motorola unit and resolve the current litigation," he writes. "Buying it would give them control of the patents while bundling TiVo with Motorola would have an significant edge over competitor Cisco, who is also in litigation with TiVo. Motorola would be more attractive with the TiVo software and a buyer could benefit from future Cisco damages. There is no indication there are acquisition talks, but any deal would need to be priced well above a 50% premium to be attractive to TIVO holders (given legal prospects)."

He adds that the trial data for the Motorola case has been set for May.